Virgin Atlantic and Stobart Group have agreed to buy Flybe in a £2.2million deal - but the 1p a share offer is at a massive discount to the 16.4p the airline's shares closed at last night.

The deal for the Exeter-based regional airline would create a new airline group, in partnership with New York-based investment firm Cyrus Capital Partners.

The Stobart Group runs Irish regional airline Stobart Air, headquartered in Dublin, which already operates some of its flights under the Flybe brand. The plan is to combine the airline with Stobart Air in a joint venture called Connect Airways.

The 'rescue' bid reflects Flybe's nosedive in fortunes, with the airline valued at about £100million a year ago and £35.5million at the close of the stock market last night.

Heavily loss-making carrier Flybe put itself up for sale in November

Cyrus will own 40 per cent of the new company, while Virgin and Stobart will take 30 per cent each.

The three companies have committed to make a £20million bridge available to provide liquidity and support Flybe's current operations, while an additional £80million will be provided to the combined group in further funding.

'A paltry £2.2m or 1p per share is being offered to investors in the company's equity as part of the rescue deal unveiled by a consortium which includes Virgin Atlantic and Southend Airport-owner Stobart.

'To put that sum in context it compares with £215m valuation at IPO back in 2010 and even 12 months ago the regional carrier was valued by the market at closer to £100m.'

Flybe shares closed above 16p last night before the offer of just 1p a share from Virgin Atlantic and Stobart Group was revealed

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He added: 'In some respects, the degree to which the market failed to anticipate such a bargain basement price is a surprise given the big profit warning in October which preceded Flybe's decision to put itself up for sale.

'Volatile oil prices, strong competition and the uncertainty around Brexit have seen several failures among smaller airlines in recent times and for Flybe to determine a 1p bid is 'fair and reasonable' it must have been in pretty dire financial circumstances.'

Shares in Flybe were still trading above the 1p level this morning, trading at 2.7p at 1045, as investors hoped that a rival bid could be flushed out to force up the price. However, the agreement on the deal makes this seem unlikely.

Flybe had been forced to seek a buyer due to higher fuel costs, currency fluctuations and Brexit uncertainty, according to Flybe chief executive Christine Ourmieres-Widener.

'We have been affected by all of these factors which have put pressure on short-term financial performance,' said Ourmieres-Widener.

'At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows,' she added.

Ourmieres-Widener continued: 'By combining to form a larger, stronger group, we will be better placed to withstand these pressures. We aim to provide an even better service to our customers and secure the future for our people.'

The airline operates from Aberdeen, Edinburgh and Glasgow to Manchester, East Midlands, Birmingham, Bristol, Southampton and Exeter.

The acquisition statement said that 'Flybe will continue to serve customers and communities across the UK and Ireland.'

Investors in Flybe have seen its share price nosedive over the past year